How next-generation consoles may eliminate the used gaming market

As metioned by Kotaku earlier today, Microsoft is reported to be testing a software or hardware method on the next version of the Xbox hardware designed to halt the ability to play used games. While this report doesn’t indicate that this feature will definitely be included in the next version, the appeal to developers and publishers is likely incredibly high. This type of solution would make it vastly more difficult for retailers like Gamestop to resell traded-in games for bloated prices, thus cutting into publisher sales. However, it’s also likely to anger consumers that want to unload old games on sites like eBay and severely harm video game rental services like Gamefly or Redbox.

The most likely scenario of this protection method would tie anyone with an active Xbox Live account and Internet connection to a specific disc of a new game release. However, finding a way to bind one game per system in an offline environment may also strike a severely devastating blow to piracy. Since piracy has increased by 20 percent over the last five years and impacts the gaming industry’s revenue each year to a certain degree, this new system of protection may halt software pirates from distributing game data when the code will only work on the first console that it’s played upon.

Gaming publishers have already been fighting the used game market by locking content within the game until a a one-time use code is entered. This allows publishers like Warner Bros. Interactive Entertainment to lock Catwoman’s single player narrative within Batman: Arkham City or Electronic Arts to require a code to enable the multiplayer portion of Battlefield 3. Any consumer that purchases a used copy of these games from retailers or other sources is at the mercy of the publisher in regards to the amount of additional money spent on digital codes.

Digital Download Countdown

While this potential used game protection scheme is definitely alarming, the gaming industry is already in a transition period between physical disc sales and digital downloads. As broadband speeds and data caps increase over the next five years, downloading a future version of Call of Duty may become the preferred practice over waiting in line at the local Best Buy.

Sony and Microsoft could also take a page out of Steam’s playbook and allow consumers to download the entire game in advance of the release date to balance server load, then unlock the ability to play the game at midnight. However, storage capacity of hard drives within the next generation of consoles would likely have to start around 500GB or 1TB to store multiple 20GB games. Similar to OnLive’s business model, cloud gaming could also be a potential solution introduced by Sony or Microsoft.

Sony is already moving in the digital download direction with the launch of the PlayStation Vita. While physical Vita games are still sold within retail stores, the digital counterpart of those titles may be acquired for a cheaper cost through download. Since digital downloads cannot be resold, the consumer loses out on recouping costs after completing a game. If the used gaming market is eliminated, publishers may see a drop in sales across all new releases as many consumers that resold used titles to finance new games will ultimately be spending less on software.

According to a related report from IGN, the new version of the Xbox hardware is estimated to be six times as powerful as the Xbox 360. The system’s GPU will be based on the AMD Radeon HD 6670 and begin mass production at the end of 2012. Over on the PC, the Radeon HD 6670 includes 3D and 1080p output, DirectX11 in addition to multi-display output. However, other reports have indicated that the next Xbox will utilize the Radeon HD 7000-series GPU from AMD.

While Nintendo’s Wii U is rumored to have twice the processing power of the Xbox 360, the next version of the Xbox hardware, often called the Xbox 720 by journalists, is estimated to be approximately 20 percent more powerful than the Wii U. The Kotaku article also indicates that the next version of the Xbox will offer Blu-ray compatibility.